SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File No. 0-09482
MYSTIQUE DEVELOPMENTS, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
WYOMING 83-0246080
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(State or other jurisdic- (I.R.S. Employer Iden-
tion of incorporation) tification No.)
or organization)
1820 South Elena Avenue, Suite B, Redondo Beach, California 90277
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(Address of Principal Executive Office including Zip Code)
(310)546-5741
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(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
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There were 1,535,076 shares of the Registrant's $.01 par value common stock
outstanding as of March 31, 1997.
Transitional Small Business Disclosure: Yes ( ) No ( X )
MYSTIQUE DEVELOPMENTS, INC.
Balance Sheet
ASSETS March 31, June 30,
1997 1996
Current Assets:
Cash $ 809,408 $ 24,971
Accounts receivable-trade 4,894 10,553
Accounts receivable-related party 5,577 6,066
Other 500 --
Total current assets 820,379 41,590
Property and equipment, at cost using
successful efforts method, net 689,242 698,046
$1,509,621 $ 739,636
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts payable $ 5,944 $ 14,522
Accounts payable-related party -- 15,000
5,944 29,522
Stockholders' Equity:
Common stock, $.01 par value:
authorized 75,000,000 shares;
issued and outstanding 1,535,076
and 550,076 at March 31, 1997 and
June 30, 1996, respectively 15,350 5,500
Additional paid-in capital 2,832,897 1,866,868
Accumulated deficit (1,344,570) (1,162,254)
1,503,677 710,114
$1,509,621 $ 739,636
See accompanying notes to financial statements
2
MYSTIQUE DEVELOPMENTS, INC.
Statement of Operations
For the Nine Months Ended March 31, 1997 and 1996
1997 1996
Operating Revenue:
Oil and gas sales $ 54,013 $ 42,685
Management and consulting
fees 3,150 501,500
57,163 544,185
Operating costs and expenses:
Lease operating costs 53,691 28,340
Depreciation and depletion 18,000 11,400
General and administrative expenses 174,348 15,693
246,039 55,433
Operating income (loss) (188,876) 488,752
Other Income (expense):
Interest income 6,560 220
6,560 220
Income(loss) before income taxes (182,316) 488,972
Income taxes -- --
Net income (loss) $(182,316) $ 488,972
Net income (loss) per common share $ (.18) $ .89
Weighted average common shares outstanding 987,812 550,000
See accompanying notes to financial statements.
3
MYSTIQUE DEVELOPMENTS, INC.
Statement of Operations
For the Three Months Ended March 31, 1997 and 1996
1997 1996
Operating Revenue:
Oil and gas sales $ 18,682 $ 25,100
Management and consulting
fees 1,050 500,450
19,732 525,550
Operating costs and expenses:
Lease operating costs 20,280 9,330
Depreciation and depletion 6,000 6,000
General and administrative expenses 123,701 499
149,981 15,829
Operating income (loss) (130,249) 509,721
Other Income (expense):
Interest income 6,399 85
6,399 85
Income(loss) before income taxes (123,850) 509,806
Income taxes -- --
Net income (loss) $ (123,850) $509,806
Net income (loss) per common share $ (.08) $ .93
Weighted average common shares outstanding 1,535,076 550,000
See accompanying notes to financial statements.
4
MYSTIQUE DEVELOPMENTS, INC.
Statements of Cash Flows
For the Nine Months Ended March 31, 1997 and 1996
1997 1996
Cash Flows from operating activities:
Cash received from customers $ 63,311 $ 42,540
Cash paid to suppliers & employees (252,117) (52,290)
Interest income 6,560 220
Net cash provided by (used in)
operating activities (182,246) (9,530)
Cash flows used in investing activities:
Purchase of assets (9,196) --
Net cash provided by (used in)
investing activities (9,196) --
Cash flows used in financing activities:
Proceeds from sale of stock 975,879 --
Net cash provided by (used in)
financing activities 975,879 --
Net increase (decrease) in cash and
cash equivalents 784,437 (9,530)
Cash and cash equivalents at beginning of year 24,971 27,537
Cash and cash equivalents at end of year $ 809,408 $ 18,007
Reconciliation of net income to net cash
used in operating activities:
Net income (loss) $(182,316) $ 488,972
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation, depletion and impairments 18,000 11,400
(Increase) decrease in accounts receivable 6,148 (501,645)
(Increase) decrease in other current assets (500) --
(Decrease) increase in accounts payable (23,578) (8,257)
$(182,246) $ (9,530)
See accompanying notes to financial statements.
5
MYSTIQUE DEVELOPMENTS, INC.
Notes to Financial Statements
NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The Company operates principally in the exploration, development and production
of oil and gas properties and consulting in the oil and gas industry.
PROPERTY AND EQUIPMENT
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Under this method, the costs of unsuccessful exploratory
wells, delay rentals, and dry hole contributions are expensed as incurred. Lease
acquisition costs and costs of drilling and equipping productive exploratory
wells and all development wells are capitalized.
Depreciation and depletion of producing properties and equipment is computed by
the unit-of-production method using management estimates or independent
engineer's estimates of unrecovered proved producing oil and gas reserves. The
total capitalized costs for individual proved oil and gas properties is limited
to the estimated future net revenues from production of proved reserves. A
recoverability test "ceiling test" of proved properties is performed on an
undiscounted basis, net of income taxes, on a well by well basis. An impairment
amount equal to all costs above ceiling is charged to operations during the
period. Other equipment is depreciated by use of accelerated methods using
estimated asset lives of 3 to 7 years. When assets are retired or otherwise
disposed of, the cost and accumulated depletion, depreciation or impairment are
removed from the accounts and any resulting gain or loss is reflected in
operations in the period realized. No accrual has been provided for estimated
future abandonment costs as management estimates that the salvage value will
approximate such costs.
INCOME TAXES
The Company uses the liability method of accounting for income taxes. Under the
liability method, income taxes are recorded for future events at tax rates in
effect when the balances are expected to be settled.
EARNINGS PER COMMON SHARE
The earnings per share is based on the weighted-average number of shares of
common stock outstanding.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
RISKS AND UNCERTAINTIES
Historically, the market for oil and gas has experienced significant price
fluctuations. Increases or decreases in prices received could have a significant
impact on the Company's future results of operations.
6
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent asset and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, such interim statements reflect all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial position
and the results of operations and cash flows for the interim periods presented.
The results of operations for these interim periods are not necessarily
indicative of the results to be expected for the full year. These financial
statements should be read in conjunction with the audited financial statements
and footnotes for the year ended June 30, 1996, filed with the Company's 10-KSB.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company has a working capital of $814,435. The Company
completed a $975,000 private placement this quarter. The Company plans to
acquire producing oil and gas properties. The Company has no commitments for any
capital improvements, however subject to financing, a major improvement project
for the Canadian property is planned for the next fiscal year.
During the nine months ended March 31, 1997, operating activities used $182,246
in cash, an increase of $172,716 over the nine months ended the previous fiscal
year. This increase in cash used is due mainly to administrative costs related
to increasing the activities of the Company. During the nine months ended March
31, 1997, financing activities provided $975,879 in cash, an increase of
$975,879 over the nine months ended the previous fiscal year. This increase is
due to sale of stock in the private placement.
During the nine months ended March 31, 1997, investing activities used $9,196 in
cash an increase of $9,196 over the nine months ended the previous year. This
increase is due to property and equipment acquisitions.
RESULTS OF OPERATIONS
During the three months ended March 31, 1997, oil and gas sales were $18,682, a
decrease of $6,418 from the quarter ended the previous year. This decrease is
due to less production. During the three months ended March 31, 1997, other
income was $1,050, a decrease of $499,400 from the quarter ended the previous
year. This decrease is due to a reduction in consulting services provided.
During the three months ended March 31, 1997, lease operating
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costs were $20,280 an increase of $10,950 from the quarter ended in the previous
year. This increase is due to some workovers. During the three months ended
March 31, 1997, depreciation, depletion and impairments were $6,000, the same as
the quarter ended in the previous year. During the quarter ended March 31, 1997,
general and administrative expenses were $123,701, an increase of $123,202 from
the previous year. This increase is due to increased activity of the Company.
Effect of Changes in Prices.
Changes in prices during the past few years have been a significant factor in
the oil and gas industry. The price received for the oil and gas produced by
Mystique fluctuated significantly during the last three years. Changes in the
price that Mystique receives for its oil and gas are set by market forces beyond
Mystique's control as well as governmental intervention. The recent volatility
and uncertainty in oil and gas prices make it more difficult for a company like
Mystique to increase its oil and gas asset base and become a significant
participant in the oil and gas industry.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On March 15, 1997, the Company entered into an Agreement for
Administrative Services (the "Agreement") with Trinity Petroleum Management LLC,
a Nevada limited liability company ("Trinity"), with its principal office in
Denver, Colorado. Pursuant to the terms of the Agreement, Trinity will perform
certain management functions for the Company for a fee of $2,000 per month and
reimbursement of third-party expenses. The Agreement is for an initial term of
six months, continuing thereafter on a month-to-month basis, terminable upon 30
days written notice by either party. Trinity's sole stockholder, J. Samuel
Butler, serves as a member of the Company's Board of Directors. The Agreement
was approved by the Board of Directors, with Mr. Butler abstaining from the
vote. Also in connection with the Agreement, the Company's Board of Directors
(Mr. Butler abstaining) approved the issuance of a warrant to Trinity for the
purchase of up to 100,000 shares of the Company's Common Stock, $.01 par value,
at a price of $1.00 per share.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.1 Administrative Services Filed herewith
Agreement dated March 15, electronically
1997, between the Company
and Trinity Petroleum
Management, LLC.
Exhibit 10.2 Common Stock Purchase Filed herewith
Warrant dated as of electronically
March 31, 1997, from the
Company to Trinity
Petroleum Management LLC.
Exhibit 27 Financial Data Schedule Filed herewith
electronically
(b) Reports on From 8-K.
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Issuer caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MYSTIQUE DEVELOPMENTS, INC.
Dated: By /s/ DENNIS R. STAAL
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Dennis R. Staal, Chief Accountant
10
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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10.1 ADMINISTRATIVE SERVICES AGREEMENT Filed herewith electronically
10.2 COMMON STOCK PURCHASE WARRANT Filed herewith electronically
27. FINANCIAL DATA SCHEDULE Filed herewith electronically